Earlier this month, as published in the May 19th Federal Register, the Federal Housing Administration (FHA) announced its intent to implement significant reductions in the upfront and annual mortgage insurance premiums (MIP) it charges for most mortgage insurance categories under the Section 232 mortgage insurance program for residential care facilities where the facilities meet industry-recognized green building certifications and achieve meaningful, measurable energy and water efficiency improvements. NGBS Green is honored to be one of the recognized certification programs, and a pathway for owners of assisted living facilities, and board and care homes to adopt higher, more energy efficient, and sustainable standards for construction, rehabilitation, repairs, maintenance, and property operations.
FHA’s new “Section 232 Green MIP” will reduce capitalized upfront MIP from 100 basis points to 25 basis points for most insurance categories for mortgages on properties that meet the requirements. In addition, FHA will reduce annual MIP rates, which are generally between 45 and 77 basis points, to 25 basis points for properties that meet the requirements. On an average FHA Section 232 transaction for an insured loan of $12.5 million, FHA estimates that a borrower will save $93,000 in upfront MIPs on many loan types, and tens of thousands of dollars in annual MIPs depending on the loan type.
Section 232 Green MIP reductions will apply for new Section 232 mortgage insurance applications where the owner of the facility indicates that the property will achieve a specified industry-recognized standard for green building certification and will achieve meaningful, measurable energy and water efficiency improvements. Other requirements include:
FHA plans to finalize and publish its implementation requirements for lenders to begin using the program with their borrowers, with the intent to begin receiving applications for the Section 232 Green MIP reduction later this year.
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